EU announces further guidance on the 2015 VAT Package

Fri 18th Jan 2013

The European Union is to propose further guidance for the changes to European VAT in 2015 for broadcast, telecommunications and electronic services – 2015 VAT Package.  This new guidance will help suppliers determine the place of taxation of such services for use with the new One Stop Shop compliance and reporting portal.

Change in VAT place of supply of B2C electronic supplies

From 1 January 2015, the place of supply / taxation for provider of the above services to consumers switches from the location of the supplier to the place of consumption.  This means that suppliers of electronic services will have to start identifying the country of residence of their customers, and start charging them the correct local VAT rate.  This will then be declared and paid through a new, single portal.  The proceeds will then be distributed to the appropriate countries.  Currently, VAT is only charged based on the country of location of the services provider.

Previous instructions have covered the process for registering with the new portal, and business and operating controls.

How to determine VAT residency of consumers

The latest guidance details working examples of how to determine the place of supply.  The principle issue is how to select the correct country of residency.  Usually this showed be the customers’ principle address and country of residence.  This can be evidenced by the customers’ billing addresses.  If not available, then the Internet Protocol (IP) address may be used.  Lastly, companies may use the customers’ banking addresses.  For telephony, the point of installation can be used to determine the place of taxation.